AllianceBernstein flags competition between the DeFi sector and banks

The financial giant AllianceBernstein, with $600 billion in assets under management, addressed decentralized exchanges in a client note and forecast DeFi protocols expanding to the scale of traditional-finance institutions.

Alliance Bernstein — $600bn asset manager — is explaining to clients the importance of Sushiswap and Uniswap pic.twitter.com/ssIWZU1tE0

— Frank Chaparro (@fintechfrank) February 11, 2021

“The DeFi sector currently offers a wide range of financial services, including lending/borrowing and exchanges. In this sense, it competes with banks and financial institutions, although DeFi is nowhere near their size yet.”

The Block analyst Frank Chaparro, who had access to the document, highlighted the word “yet” in this quote.

“DeFi Dapps currently offer a variety of financial services, including lending/borrowing and financial exchanges. In this sense, DeFi competes with banks and financial institutions, though DeFi is nowhere close to their size yet.”

Yet. 🧐 pic.twitter.com/T6sBdRiX2R

— Frank Chaparro (@fintechfrank) February 11, 2021

Researchers at AllianceBernstein highlighted four advantages of DeFi over the traditional financial system:

• Lower costs: decentralized protocols eliminate intermediaries, and the fees they charge are minimal.
• Faster processing: transactions can take from a few seconds to minutes, unlike traditional services.
• Transparency: the Ethereum blockchain, on which most DeFi protocols are deployed, is open for audit and decentralised. It also removes the risk associated with a single point of failure, as during Мирового экономического кризиса 2008 года, начавшегося с коллапса Lehman Brothers.
• Increased accessibility. Globally, 1.7 billion people are unbanked. In developing countries, amid volatile national currencies and weak governance, DeFi services are becoming a real alternative.

Earlier, the Federal Reserve Bank of St. Louis considered the advantages and risks of deploying DeFi protocols in the financial infrastructure.

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